Corporate Winners And Losers

Author: Tiziana Barghini
Ades, Bank of America Merrill Lynch: We have seen the sell-off in Venezuelan bonds and the sell-off in the Russian ruble.
Halff, IEA: The gap between supply and demand looks like it is going to increase in the first half of the year despite the pressure coming from low prices.


BlackRock, which manages more than $4.5 trillion in assets, sees lower oil prices helping the US economy overcome the loss from lower capital expenditures. Current prices effectively transfer some $1.3 trillion in total from oil producers to oil consumers.

“The net conclusion is that lower oil prices are unambiguously a positive for global growth,” notes Jeff Rosenberg, BlackRock chief investment strategist for fixed income. “Consumption-based economies are the main winners, and the US is clearly the largest of those, followed by Europe ex Germany (Germany is less a consumption-oriented economy). Japan is another net winner, although for Japan the effect of oil prices is clearly not as large as it is for the US.”

According to estimates by the International Monetary Fund, global demand [consumption] in 2015 could be boosted 0.8% by the lower cost of oil. Different econometric models diverge by a few basis points. But global economists have been very cautious in jumping on the train of global growth estimate revisions. For Alberto Ades, co-head of global economics and head of global emerging markets fixed-income strategy at Bank of America Merrill Lynch, it is difficult to draw clear conclusions. “Fifty basis points is a ballpark estimate. It could be higher—I saw an estimate of 100 basis points—or it could be lower than that,” said Ades, adding that the impact of oil price decline can be asymmetric, with price hikes more important than price declines. “Practically speaking, I do not think that anyone—ourselves, the IMF or our competitors—has increased its growth forecast by 50 basis points next year.”

Merrill Lynch believes that countries such as Turkey, South Africa, China, Korea, Indonesia, India and Brazil are the countries set to benefit the most. The beneficial impact may be even larger for some emerging countries because their sensitivity to oil is higher, says José Gerardo Morales, CFA, US chief investment officer for Mirae Asset Global Investments. “The weight of energy in the inflation basket is higher for them, so there is a bigger benefit in the emerging markets of an oil price drop,” he notes. “Clearly, it is always important to differentiate [among] emerging markets—and some countries such as Russia will be at a disadvantage and may fall into recession. Apart from oil exporters, most emerging markets will benefit.” Morales says that the so-called Fragile Five (Turkey, South Africa, Brazil, India, and Indonesia). will benefit because they are net oil importers. The same is true for most of the countries in Asia. For Mirae Asset, which has $62 billion in assets under management, $15 billion of them in emerging markets equity, lower oil prices mean a better look at investment opportunities in winner countries.



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